Partners' centrality diversity and firm innovation performance: Evidence from China

While most studies of firm innovation with a social network perspective have focused on the focal firm's network structure, we explore the value of second-order social capital by examining partners' network structure to better understand firm innovation. Specifically, we examine how centrality diversity of the focal firm's network partners affects its innovation performance. A longitudinal study of Chinese publicly listed manufacturing firms from 2000 to 2016 indicates that partners' centrality diversity in a firm's board interlock network is positively related to that firm's innovation performance. We also find that the focal firm's knowledge breadth weakens the effect of partners' centrality diversity on innovation performance for the focal firm, while the proportion of non-independent ties between the focal firm and its network partners strengthens the effect.     

Global network configuration for innovation: a study of international fibre innovation

This paper develops and empirically investigates the notion of network configuration for innovation. In many industries, firms are increasingly locked into a state of network innovation. Innovation, in such contexts, is often driven by those firms who configure the network to access and control critical innovation knowledge widely dispersed throughout the network. The paper presents the findings of an in-depth study of the evolution of three innovation networks in the global fibre industry. The mechanisms by which firms configure extended networks throughout the innovation processes are unravelled and discussed. A typology of three configuration types derived from the finding is forwarded. The findings suggest that successful innovation network configuration involves recognising where the innovation value resides in the network and developing capabilities and mechanisms to understand and access such value. However, this is problematic for firms embedded in their own base of knowledge and patterns of relationships. Specific managerial implications and suggestions for future research are forwarded.     

Whose Innovation Performance Benefits More from External Networks: Entrepreneurial or Conservative Firms?

The primary contribution of this research is positing and empirically supporting the proposition that learning through external networks disproportionately benefits conservative, risk‐averse firms. The construct, entrepreneurial orientation (EO), is used to discriminate conservative, risk‐averse firms from proactive, risk‐seeking firms. Organizational learning theory and social capital theory are employed to support our hypotheses. Based on a study of 1978 U.S. firms, the paper suggests that the utilization of external networks (i.e., the process of learning from information, perspectives, and insights embedded in external networks) may act as a primary driver for innovation for those firms that are either not inclined and/or do not have the capabilities to adopt entrepreneurial culture. Specifically, weak EO firms' innovation performance benefits from utilizing external networks more than strong EO firms'. This research also tests for the moderating role of firm size and finds that the negative moderating effect of EO on the external network utilization–innovation performance relationship is more pronounced in small and medium sized enterprises (SMEs) than large firms.     

The impact of global and local cohesion on innovation in the pharmaceutical industry

In this paper, we examine how the configuration of intraorganizational networks, and in particular, cohesion among members of an organization, influences organizations' innovative output. We argue that the cohesion among R&D scientists could be at a local level or a global level, and that local and global cohesion may have different impacts on firms' innovation performance. We test our hypotheses by examining the structure of the R&D collaboration networks within firms that operated in the pharmaceutical industry between 1981 and 1989, and their innovative outcomes—patents that led to new product launches. We find that local cohesion has a positive impact on the innovative performance of a firm, and global cohesion has a negative impact. Copyright © 2011 John Wiley & Sons, Ltd.     

More than network structure: how knowledge heterogeneity influences managerial performance and innovativeness

This study deals with individual managerial performance, both overall and in generating innovation. While prior work has demonstrated a relationship between network structure and managerial performance, inadequate attention has been paid to network content. We consider several micro‐social processes that might account for differences in managerial performance, taken from economic sociology and studies of managers' exploitation of their social networks and derived from work in psychology on the genesis of ideas. We compare the influence of these mechanisms on managerial performance using a sample of 106 middle managers in a European telecommunications company. Our findings suggest that, while network structure matters, access to heterogeneous knowledge is of equal importance for overall managerial performance and of greater importance for innovation performance. Copyright © 2004 John Wiley & Sons, Ltd.     

The leveraging of interfirm relationships as a distinctive organizational capability: a longitudinal study

In this paper we present a study of the structure of three lead firm‐network relationships at two points in time. Using data on companies in the packaging machine industry, we study the process of vertical disintegration and focus on the ability to coordinate competencies and combine knowledge across corporate boundaries. We argue that the capability to interact with other companies—which we call relational capability—accelerates the lead firm’s knowledge access and transfer with relevant effects on company growth and innovativeness. This study provides evidence that interfirm networks can be shaped and deliberately designed: over time managers develop a specialized supplier network and build a narrower and more competitive set of core competencies. The ability to integrate knowledge residing both inside and outside the firm’s boundaries emerges as a distinctive organizational capability. Our main goal is to contribute to the current discussion of cooperative ties and dynamic aspects of interfirm networks, adding new dimensions to resource‐based and knowledge‐based interpretations of company performance. Copyright © 1999 John Wiley & Sons, Ltd.     

A network perspective on idea and innovation crowdsourcing in industrial firms

Crowdsourcing has been attracting the attention of both academics and practitioners over recent years. The aim of this article is to contribute to the current body of knowledge on innovation in networked contexts by systematically analyzing various crowdsourcing configurations available to industrial firms. We first develop a categorization of crowdsourcing in industrial firms comprising four distinct configurations: internal crowdsourcing; community crowdsourcing; open crowdsourcing; and crowdsourcing via a broker. We then proceed to draw from the literature on industry networks to further deepen our understanding of how these four distinct configurations can contribute to business and innovation activities of a focal industrial firm. Specifically, we focus on the structural properties, nature of collaboration, and governance of crowdsourcing networks. This novel combination of crowdsourcing and network research delivers new insights that enrich current understanding on various options available to industrial firms operating in networked contexts to facilitate their innovation processes.     

Leveraging stakeholder networks with outside-in marketing

The theory of Outside-in marketing (OIM) emphasizes the importance of internal and external partners of a firm to drive strategies for value creation. OIM is based on four key tenets: market sensing and responses, segmentation and targeting, innovation, and employee's learning effort. With this commentary, we apply the theory of OIM to network analysis. By doing so, we identify key stakeholder networks as part of a firm's business ecosystem and discuss the value that can be extracted from different stakeholder networks. Most prior network research in marketing has mainly used customer or employee network data while neglecting other important stakeholder groups. We provide information about how network analysis of stakeholder data can fill gaps in the marketing literature and provide firms with essential knowledge, economic value, and influence over external partners, and improve the value generation process. We first describe each tenet and give examples of stakeholder networks that can be investigated within the realm of the tenet definitions. We then discuss different challenges that social network research can pose, and end with future research questions that can be explored for empirical research studies.     

Network location and learning: the influence of network resources and firm capabilities on alliance formation

This paper presents a dynamic, firm‐level study of the role of network resources in determining alliance formation. Such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed. Data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners, such resources are an important catalyst for new alliances, especially because alliances entail considerable hazards. This study also assesses the importance of firms’ capabilities with alliance formation and material resources as determinants of their alliance decisions. I test this dynamic framework and its hypotheses about the role of time‐varying network resources and firm capabilities with comprehensive longitudinal multi‐industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989. The results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms’ decisions to enter into new alliances. This study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior. Copyright © 1999 John Wiley & Sons, Ltd.     

How Central Is Too Central? Organizing Interorganizational Collaboration Networks for Breakthrough Innovation

Firms increasingly look to collaboration with alliance partners in their quest for breakthrough innovation. But how does the position of a firm in its alliance network weighted by the centrality of its partners—a concept which we term “partner‐weighted alliance centrality”—and the heterogeneities in the types of partners that it cooperates with—in terms of its private‐public collaboration—influence this quest? Using longitudinal data from the U.S. pharmaceutical industry, we build alliance networks in the period 1985–2001 to investigate these questions. We show that, for breakthrough innovation, collaborating with more partners that are more central in alliance networks the better, but only to a point. Beyond that point, we find that the likelihood of achieving breakthrough innovation drops. Furthermore, and looking at the kinds of knowledge provided by the partners in each firm's alliances, we report that firms with a greater share of private partners, relative to public partners, suffer less from the diminishing benefits of collaboration with central partners when developing breakthrough innovation. Taken together, we make novel contributions about how to organize for breakthrough innovation, and provide actionable managerial advice in terms of selecting collaborative partners in alliance networks.     

Multipoint contact without forbearance? How coverage synergies shape equity analysts' forecasting performance

Research Summary: Scholars regularly use multipoint contact (MPC) to explain how encountering rivals in different domains shapes performance. While most explanations rely on mutual forbearance theory, I propose that competitive deterrence does not adequately explain how MPC shapes performance in knowledge intensive work and argue instead that cross-domain synergies may play a central role. I examine how security analysts' MPC with publicly traded firms captures synergies in their coverage portfolio, which improves forecasting accuracy and information leadership. The advantages of greater MPC for a focal analyst are counterbalanced by rivals' observational learning, which reduces the focal analyst's forecasting differentiation. A natural experiment helps corroborate my argument: rival analysts' forecasting accuracy dropped for firms in which high MPC analysts perished in the terrorist attack on September 11, 2001. Managerial Summary: Competition in the knowledge economy often unfolds across multiple domains including product markets, geographic locations, and customer segments. In these settings, an actor's level of multipoint contact (MPC) in a domain captures the knowledge and other synergies available to the focal actor, which can improve performance in the domain. In the equity research setting, an analyst's MPC on a focal firm captures the likelihood that the analyst also covers that firm's suppliers, customers and important competitors. Using data on analysts' forecasting performance between 2001 and 2013, I find that greater levels of MPC on a focal firm predicts greater forecasting accuracy and information leadership but also lowers forecasting differentiation by attracting rivals who observe and benefit from the focal analyst's knowledge.     

Network structure and innovation: The leveraging of a dual network as a distinctive relational capability

This paper employs comparative longitudinal case study research to investigate why and how strong dyadic interfirm ties and two alternative network architectures (a ‘strong ties network’ and a ‘dual network’) impact the innovative capability of the lead firm in an alliance network. I answer these intrinsically cross‐level research questions by examining how three design‐intensive furnishings manufacturers managed their networks of joint‐design alliances with consulting industrial design firms over more than 30 years. Initially, in order to explore the sample lead firms' alliance behavior, I advance an operationalization of interorganizational tie strength. Next, I unveil the strengths of strong ties and the weaknesses of a strong ties network. Finally, I show that the ability to integrate a large periphery of heterogeneous weak ties and a core of strong ties is a distinctive lead firm's relational capability, one that provides fertile ground for leading firms in knowledge‐intensive alliance networks to gain competitive advantages whose sustainability is primarily based on the dynamic innovative capability resulting from leveraging a dual network architecture. Copyright © 2007 John Wiley & Sons, Ltd.     

Do ongoing networks block out new friends? Reconciling the embeddedness constraint dilemma on new alliance partner addition

Research Summary: This study addresses a theoretical dilemma regarding how alliance network constraint (reflected by network cohesion) affects a firm’s alliance formation with new partners. Using a network pluralism approach, we separate a firm’s ego alliance network into two activity‐based networks—an exploratory network and an exploitative network—based on the primary value chain activity involved in each alliance. We argue that the cohesion of exploratory or exploitative networks has an inverted U‐shaped effect on the addition of new partners in the same activity‐based network, and a positive effect on the addition of new partners in the other network. Results based on data from the biotechnology industry largely support our predictions with one exception. Our study contributes to both scholarly understanding of network embeddedness and alliance practice. Managerial Summary: The structure of firms’ ongoing alliance networks may have paradoxical implications for their efforts to search for and form alliance with new partners. That is, when a firm’s alliance partners are tightly connected with each other, the cohesive network tends to both encourage and impede the focal firm to add new partners. We resolve this dilemma by showing that when a firm is deeply entrenched in a cohesive alliance network conducting a certain type of activities (e.g., R&D activities), it may not easily add new R&D alliance partners. However, it may still be able to escape from the cohesive R&D alliance network by seeking new partners conducting other activities (e.g., manufacturing activities).     

Resource ambidexterity through alliance portfolios and firm performance

Research summary : Partner resources can be an important alternative to internal firm resources for attaining dual and seemingly incompatible strategic objectives. We extend arguments about managing conflicting objectives typically made at the firm level to the level of a firm's alliance portfolio. Specifically, will a balance between revenue enhancement and cost reduction attained collectively through partner resources accessed via a firm's various alliances be similarly beneficial for firm performance? Additionally, how do strategic attributes of alliance portfolio configuration, specifically alliance portfolio size and partner resource scope, condition the balance‐performance relationship? Based on data from the global airline industry, we find support for the balance‐performance relationship, though such balance is less beneficial for firms in the case of access to a broader resource scope per partner . Managerial summary : Increasing revenue and reducing costs simultaneously can potentially enhance firm competitiveness. We highlight that an alliance strategy can be an important alternative to internal resources for attaining such dual strategic objectives, particularly when partner resources accessed through alliances are treated collectively as portfolios. We examine the importance of balancing product‐market extending and efficiency‐improving partner resources in the global airline industry as well as the impact of two alternate strategies for accessing resources through alliances: fewer partners with more resources per partner or more partners with fewer resources per partner. We find that resource balance at the portfolio level helps airlines improve performance. Our results also suggest that managers should be cautious of accessing too many resources through just a few partners . Copyright © 2015 John Wiley & Sons, Ltd.     

Social capital and its effect on networked firm innovation and competitiveness

International and local policymakers have repeatedly encouraged the development of clusters—a dense geographic concentration of interconnected businesses—to boost competitiveness at both the firm and regional levels, as well as foster innovation and new product development. Following this trend, many initiatives have started to provide services and infrastructure that can facilitate the establishment of formal and informal ties between firms, local institutions or research centres, as well as upgrade the stock of human and intellectual capital. In this scenario, the present study empirically documents the effects of an innovation network, established by a regional government institution, on the participating firms. In particular, firm-level primary data, derived from the participants of “Polo di Innovazione ICT - Abruzzo” in Italy, empirically support how the cognitive, structural and relational dimensions of the social capital developed within a cluster initiative affect the performance of participating firms, unveiling a negative moderation effect arising from firms' involvement in the cluster program.     

The evolution of firm networks: from emergence to early growth of the firm

This paper addresses whether cohesive networks of socially embedded ties or sparse networks rich in structural holes are more conducive to the success of new firms. We propose that the networks of emerging firms evolve in order to adapt to the firm's changing resource needs and resource challenges. As firms emerge, their networks consist primarily of socially embedded ties drawn from dense, cohesive sets of connections. We label these networks identity based. As firms move into the early growth stage, their networks evolve toward more ties based on a calculation of economic costs and benefits. This shift from identity-based to more calculative networks is manifested in the evolution of the firm networks: (1) from primarily socially embedded ties to a balance of embedded and arm's-length relations; (2) from networks that emphasize cohesion to those that exploit structural holes; and (3) from a more path-dependent to a more intentionally managed network. Thus, this paper suggests that both cohesive and sparse networks are conducive to firm performance when they are aligned with and address firms' evolving resource challenges. Copyright © 2001 John Wiley & Sons, Ltd.     

Creating shareholder value via collaborative innovation: the role of industry and resource alignment in knowledge exploration

Collaborative innovation provides firms with a privileged opportunity to perform exploration in an externally oriented mode. The central challenges in exploration via collaborative innovation lie in the selection of relevant partners and in gaining access to potentially valuable external knowledge that the focal firm lacks. This article focuses on two aspects of inter-organizational alignment that affect knowledge differences and may thus help explaining the shareholder value implications arising from collaborative innovation: industry and resource alignment. Relying on data covering 97 bilateral collaborative innovations (194 innovation partners) in R&D intensive high-technology industries, we used event study methodology and follow-up hierarchical regression analyses to test our conceptual framework. With regard to industry alignment, results suggest that investors value greater industry distance between collaborating partners, especially when the partner firm provides high-level R&D resources. Furthermore, the results show a positive effect of supplementary resource alignment (i.e., a focal firm's R&D resources are supplemented by a partner firm's R&D resources) and, notably, a negative effect of complementary resource alignment (i.e., a focal firm's R&D resources are complemented by a partner firm's marketing resources) on investors' valuation of the collaboration's expected future performance. They, thus, contribute to research on shareholder value implications of collaborative innovation. From a managerial perspective, the study provides a better understanding of partner selection and shows how managers should position a collaboration to signal the shareholder value-creating potential to investors.     

Leveraging micro‐ and macro‐structures of embeddedness in alliance networks for exploratory innovation in biotechnology

Researchers agree that alliance networks can be an important instrument in a firm's innovation process, but there is limited empirical evidence on actually how they facilitate the creation of new knowledge for exploratory innovation. The research question is what alliance network configuration is optimal for exploratory innovation. The present study investigated the interaction between a firm's alliance portfolio structure (the micro‐level) and the industry alliance network structure (the macro‐level), and it empirically tested how their interaction may be affecting the exploratory innovation outcome of network participating firms in the biotechnology industry. The paper uses data from exploratory patents filed by 455 dedicated biotechnology firms in 1986–1999 and an overall network comprising 2,933 technological alliances over the same period. The results indicate that, in the case of biotechnology, firms with high exploratory innovation output have short path indirect access to many other firms (micro‐level), and operate in dense industry alliance networks centralized around a few key firms (macro‐level), and that these effects are curvilinear.     

Clusters,networks, and firm innovativeness

This paper extends current knowledge of industry clusters by disentangling the effects of networks from cluster (i.e., distinctly geographic) mechanisms on firm performance as well as by studying the influence of these different mechanisms on firms located inside and outside the industry cluster. It also highlights the importance of simultaneously modeling multiple networks which may differentially influence important firm outcomes. In the paper, I model the innovativeness of Canadian mutual fund companies as a function of their geographic location—inside or outside the industry cluster of Toronto—and of their centrality in networks of managerial and institutional ties. I find that locating in the industry cluster as well as centrality in the managerial tie network enhances firm innovation, while centrality in the institutional tie network does not. Copyright © 2005 John Wiley & Sons, Ltd.     

The sum of its parts: Examining the institutional effects on entrepreneurial nodes in extensive innovation ecosystems

Innovation ecosystems are intricate networks that provide opportunities to access resources, capabilities, and cooperating firms for value-creating knowledge transfer. While the literature has noted the complex nature of diverse innovation ecosystem actors, fewer studies have refined how macro-institutional pressures impact behavioral interactions among diverse entities. The innovation ecosystem research has yet to theoretically refine how micro-level complex components (entities) navigate environments, coalescence, and overcome barriers within varying institutional conditions. Ultimately, each entity behaves and is governed by diverse motivational drivers. Yet, the divergent impacts this has on key behaviors have not been covered by broader-scale empirical studies. Therefore, this study focused on the institutional mechanisms that influence the crucial role of entrepreneurial networking activities in ecosystems. Using a global sample, the study employed a multi-level logistic regression model and data developed from the Global Entrepreneurship Monitor, World Development Indicators, Index of Economic Freedom, and the World Governance Indicators to reveal certain forms of institutional settings that influence collaborative behavior in the ecosystem and entrepreneurial networks' emergence. It emphasizes the need for managers and policymakers to recognize these effects and enact strategies that promote value-creating entrepreneurial network behavior on the individual level to benefit the holistic ecosystem performance.